Amendatory Clause Real Estate Certification, Appraisal (buyer's agent, contract, closing, listings)

[questioneverything]

Amendatory Clause / Real Estate Certification

Unexepectedly, this form was presented to the Seller to sign-off on at early escrow signing. The seller was confused by the wording, concerned if it's not in their best interest and has no knowledge of what the appraisal came in at. They are also asking why are they getting this now, when the buyer already removed all contingencys?
Q. Does the Seller have to sign this?
Q. If the Seller signs this, does it over ride the fact the Buyer already removed all contingencys?
Q. If a Seller signs this, could a Buyer potentially back out at the last minute without risk to their earnest deposit?

"... the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise,

unless the purchaser has been given, in accordance with HUD/FHA or VA requirements, a written statement by the Federal Housing Commissioner, Dept. of Veterans Affairs, or a Direct Endorsement lender setting forth the appraised value of the property of not less than $____(offer price)

The purchaser shall have the privilege and option of preceeding with consummation of the contract without regard to the amount of the appraised valuation."

[Elke Mariotti]

I just experienced that on one of my listings where the seller applied for an FHA loan.

On the bottom half, both the seller's and the buyer's agents have to sign as well.

When I questioned my seller's attorney, the reply was: "that's a standard form with an FHA loan, go ahead and sign it."

[Silverfall]

Yes. They can't get the loan unless you sign it. It is a required FHA doc. It is supposed to be presented earlier so that the seller is aware that if the house doesn't appraise, the buyer gets their earnest money back, but most lenders don't do it until the closing table.

[Bill Keegan]

Originally Posted by questioneverything

Amendatory Clause / Real Estate Certification

Unexepectedly, this form was presented to the Seller to sign-off on at early escrow signing. The seller was confused by the wording, concerned if it's not in their best interest and has no knowledge of what the appraisal came in at. They are also asking why are they getting this now, when the buyer already removed all contingencys?
Q. Does the Seller have to sign this?
Q. If the Seller signs this, does it over ride the fact the Buyer already removed all contingencys?
Q. If a Seller signs this, could a Buyer potentially back out at the last minute without risk to their earnest deposit?

"... the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise,

unless the purchaser has been given, in accordance with HUD/FHA or VA requirements, a written statement by the Federal Housing Commissioner, Dept. of Veterans Affairs, or a Direct Endorsement lender setting forth the appraised value of the property of not less than $____(offer price)

The purchaser shall have the privilege and option of preceeding with consummation of the contract without regard to the amount of the appraised valuation."

Did the contract have a financing clause in it, saying something to the effect of, if the purchaser tries to get a loan to purchase, but is unable to get it, the purchaser may elect to back out of the transaction?

I'm no lawyer, but to me this looks like it is nothing more than an appraisal contingency, which is inherent in a financing contingency anyway.

[yousah]

It's standard FHA language basically stating that there is an appraisal contingency. In fact, that same language is contained in one of the riders of our real estate contract when using FHA financing. I'm assuming that the contract that the buyers signed in your transaction didn't have the required language, so now the lender is requiring it as a separate document.

[KonaKat]

No one sees an appraisal on an VA loan - only the VA and then they send a Certificate of Reasonable Value, so concerns about not seeing the appraisal are not a worry. Plus, a seller seldom gets to see an appraisal anyways.

[Silverfall]

Originally Posted by yousah

It's standard FHA language basically stating that there is an appraisal contingency. In fact, that same language is contained in one of the riders of our real estate contract when using FHA financing. I'm assuming that the contract that the buyers signed in your transaction didn't have the required language, so now the lender is requiring it as a separate document.

We have the language in our contract and they still have to sign it. It is just a required document.

[SmartMoney]

Random thoughts:

The Amendatory Clause for VA/FHA loans is supposed to be in the file before the Direct Endorsement Underwriter issues the loan approval, and it should be dated before or the same date as ratification (unless financing is changed to FHA/VA between application and closing). Also, it's considered an addendum to the contract, so the appraiser should have a copy, as well.

Recent federal laws require the buyer to receive a full copy of the appraisal three days prior to closing, not just a Notice of Value on a VA loan.

Most lenders never share an appraisal with the seller. Even if it's low, the buyer must share it with their agent and the selling agent should send to the seller's agent.